UNITED STATES

US stocks opened the week on a high spurred by outperformance in corporate earnings and increased optimism over the completion of a Phase 1 trade deal between the US and China. The US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Vice Premier Liu He on Friday and expressed confidence that an agreement would be completed soon. The S&P in particular gained 0.56% to close at a record high of 3,039.42 points while the NASDAQ rose 1.01% to close just 4.22 points off its record high. The DOW was up 0.49% to close about 1% below its record. Treasury yields closed higher with 2Y and 10Y USTs at 1.6435% and 1.8420%.

UNITED KINGDOM

Prime Minister Boris Johnson’s attempt to have a general election was gain thwarted by Parliament on Monday; Boris only managed to get 299 votes in support of the election, falling well short of the 434 votes needed for elections to hold. Having already obtained an extension from the EU earlier in the day, the premier was hoping for greater support particularly given that the chance of crashing out without a deal had gone but this was not to be. In a bid to force an election Boris then launched a bill setting the election date for December 12 setting aside the Fixed-Term Parliaments Act; in so doing, only a simple majority would pass the election instead of the two-thirds required normally. The pound closed higher at $1.2863 as did yield on 10Y and 30Y UKTs which closed at 0.722% and 1.231%.

ASIA 

Asian markets were mixed on Tuesday despite increased optimism over the trade war. President Trump remarked earlier on Monday that negotiations on the Phase 1 deal were going faster than expected before Trade Representative’s office said it was considering extending tariff exemptions on some $34 billion of Chinese goods. Chinese stocks were however not buoyed by the news with the CSI leading the slide at -0.87% while the HANG SENG also fell 0.39% as chief executive Carrie Lam said the protests risked sending the city into recession. The NIKKEI closed 0.47% higher while the ASX gained 0.07%.

TURKEY

Turkey is planning a slew of amendments to boost its coffers as the government faces a particularly heavy debt repayment schedule in 2020. A draft bill submitted to Parliament last week seeks to increase income tax for income above 500,000 liras as well as other levies on interest on foreign currency deposits and high value properties. Another proposal seeks to raise the net borrowing limit by 70 billion liras, having already raised it twice in 2019. The tax changes alone are expected to rake in 6 billion liras and should help alleviate the strain on the budget where the fiscal deficit up to September represents a 51% increase from the deficit over the same period in 2018. The lira was firmer at 5.7314 to the dollar while TURKEY 29s were higher, trading in the low 108s.

LATAM

Argentine president-elect Alberto Fernandez held a meeting with outgoing Mauricio Macri on Monday, a gesture the market views as key during the transition from market-friendliness to populism; Fernandez won Sunday’s vote with 48% while Macri got 40%. Scant details of their meeting were released besides Fernandez’ intent to provide a team who’ll work with the Macri administration during the transition. Wary of even greater capital flight and depreciation of the peso, the central bank tightened limits on dollar purchases from $10,000 to $200 per month. Bonds closed at least a point lower on Monday with ARGENT 48s trading in the mid 39s from Friday’s low 41s while ARGENT 28s closed in the low 39s from the high 40s on Friday. The peso was about flat at 59.5011 at the official rate while the unofficial rate slipped to almost 82 from 80 on Friday.

RUSSIA

Ruble-denominated bonds have continued to pick up following the Bank of Russia’s 50bps cut to the benchmark rate on Friday. The cut, the largest since 2017, sent the rate to 6.5% while the year-end inflation forecast fell to 3.2-3.7% as the central bank acknowledged that disinflationary risks outweighed pro-inflationary ones. Ruble-denominated RFLBs have gained with yield falling 11bps on RFLB 29s and 27s since the announcement to yesterday’s close of 6.380%, a record low and 6.300% respectively. The ruble has also been steadily picking up closing at 63.7466 against the dollar on Monday. RUSSIA 29s and 47s were however lower on Monday, trading in the high 107s and low 118s respectively.

SSA

The South African government will later on Tuesday release a special paper setting out the roadmap for Eskom’s recovery. The comprehensive roadmap to be released by Public Enterprises Minister Pravin Gordhan will set out a comprehensive roadmap for the embattled power utility. The market will be keen to know details of the recovery plan as analysts point out that the company’s wellbeing impacts the wider economy and in particular, the fiscus. The rand closed firmer at 14.5612 to the dollar while SOAF 29s and 49s were lower, trading in the low 101s and high 99s respectively.